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Author Topic: Route Profits: Turboprops vs. Jets  (Read 3689 times)

DenisG

  • Former member
Route Profits: Turboprops vs. Jets
« on: June 12, 2009, 03:46:25 PM »
Hi guys,

again a nooby question: I just started routes with my first jet for my first time and was wondering about the to be profits. My props operate on 8 legs per day, bringing in a direct-cost deducted profit of over 20k each. Now my first jet, B737-200, operating 6 legs per day on free routes, brings in around 30k compared. I find that quite low, considering the double pax its carrying. I still have some potential on load factor, which is currently at 70%, but still, I would had expected a much stronger impact. Can you give me some hints on this, where I should be targeted? Thanks.

Denis

dG Airlines

DenisG

  • Former member
Re: Route Profits: Turboprops vs. Jets
« Reply #1 on: June 12, 2009, 08:31:58 PM »
Just as a rule of thumb: My DHC-7 make their weekly lease-rate within one day of operation. I would expect the same for the jets actually. But the costs seem much higher though. I made an upscaling of load factor, but that would also not give me results near the props. Any comparisons? Thanks.

Offline Sigma

  • Members
  • Posts: 1920
Re: Route Profits: Turboprops vs. Jets
« Reply #2 on: June 12, 2009, 11:12:49 PM »
Why do you consider it low?

Props cost a LOT less to operate.  There's only 2 reasons they're not used more often in service today -- speed and passenger comfort (noise).  And there's good reason why they're preferred by a lot of smaller outfits -- you can charge low ticket prices on few passengers and still make money.  Whereas jets have to be mostly full of well-paying passengers to make good money.  Very high costs with operating a jet, particularly fixed costs which you're not seeing on the figures you're quoting and would actually make your profit quite a bit less than you're seeing.

Your 737 requires almost twice as many personnel to operate and more than 3 times the fuel as compared to the DHC-7.  And, since you're only operating it at 70%, the fact that it can hold twice as many people is a moot point because you're only hauling about 20% more people, but it's costing you a lot more to haul that extra 20% because of the added fuel and personnel costs.  You're spending the money all the extra money to haul those twice as many people, but you're not hauling that many more than you could on the much-cheaper DHC-7.  Frankly, I'm surprised you're making 50% more profit with the 737, I'd expect it to be quite a bit less.  And actually once you factor in overhead it probably is (fixed maintenance costs on jets are considerably higher than props).

On the plus side, your costs to haul additional passengers is fairly small.  So if you're only at 70% your profit has a lot of room to grow.  Because it took the first 50% (hypothetically, I don't know your route revenue) just to cover the costs to operate the plane.  The extra passengers after that are all profit.  So your next 30% will go largely right to the bottom line.
« Last Edit: June 12, 2009, 11:15:28 PM by Sigma »

DenisG

  • Former member
Re: Route Profits: Turboprops vs. Jets
« Reply #3 on: June 12, 2009, 11:28:59 PM »
Yes, I see. I went through it on paper and got pretty much your result too. And you have a good point with the business class contribution, which I did not have - it was rather a Tier-3 route, although pax demand was sufficient. Anyway, I did not like it and gave the plane back. This additional service only lowered my margins significantly and my little airline is not sound for that yet. There is enough short route demand, where I can fly 8 legs with my props and enjoy time ticking... But thanks a lot for your answer! Although this scenario is called the "Jet Age", I guess, I will get to that later on...

Denis

Offline Sigma

  • Members
  • Posts: 1920
Re: Route Profits: Turboprops vs. Jets
« Reply #4 on: June 12, 2009, 11:56:33 PM »
Don't worry about operating props or small planes for that matter.

I'm #2 for Pax in the game (JA#1) and started off with dozens of F28s.  Yeah, they're jets but not exactly "glamorous".  Only later when I needed slots did I move on to replacing them with fewer, larger A300s.  I still operate a large fleet of 120 of them.

One of my Alliance partners, Big Apple, #1 in pax in the game didn't have a single plane over about 125 pax until just a few game-months ago.

Another one of my alliance parters, C A, #5 in pax in the game, started off with props.  He continues to operate a fleet of almost 100 HS 748s.

And yet another, #4 in pax in the game, started off mainly with BAC 1-11s -- again, hardly a plane people lust after.  He continues to operate about 120 of them.

Are you noticing a trend here?  ;)

DenisG

  • Former member
Re: Route Profits: Turboprops vs. Jets
« Reply #5 on: June 13, 2009, 12:23:11 AM »
Yes, although I would not call it a 'trend', but rather a sound strategy. Every company needs to build up a cash-cow as back-bone first. Same goes for the airline industry. And in reality even more so, since long-haul flights mostly render due to business and first class pax contribution, not economy pax.

The only reason I tried the jet for a few weeks was that I already had those routes on my props, but that limited me to six legs per day for that plane because of the range (450nm). I hoped that with better speed, I could make eight legs per day, but that didn't work out - from theoretical route planning it did, but I needed higher turnaround than I had prevised.

And yes, I consider the cost advantage of props decisive when going into competition. I even try to fly my competitive routes only with my (so far) one purchased plane to give it a long breath concerning cash-flow. It's been quite challenging so far flying out of Frankfurt since World Airlines has basically taken everything or really bashes everyone out when they come in (e.g. look at Frankfurt-Hamburg currently).

As for that, I will find me some small airports with asphalt runways, where my DHC-7 can land and most other planes not...

Thanks again for your advice! I really appreciate that!

Best regards,

Denis

Offline Unbornio

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  • Posts: 662
Re: Route Profits: Turboprops vs. Jets
« Reply #6 on: June 15, 2009, 02:03:26 PM »
Jets fly faster = more passenger demand than props = Less time wasted = more routes = more profit = win win
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DenisG

  • Former member
Re: Route Profits: Turboprops vs. Jets
« Reply #7 on: June 15, 2009, 08:18:27 PM »
Hi Unbornio,

thanks for your additional comments. Just a few observations from me on that:

Jets fly faster: Yes. The legs tend to be short, although up to 500nm distance, it does not value in that big according to my experience.

More pax demand than props: To my experience, price sensitivity is much higher. I can offer lower prices with my prop and still remain profitable, especially on routes I am entering anew with competition.

Less time wasted: Depends on the distance, because turn around times are higher e.g. Frankfurt-Hamburg, I may need 15 minutes more to fly it with prop, but B737 need 65 minutes turnaround and this is where I make up the difference in time with my prop.

More profit: In fact, I was not able to confirm this, at least on short routes.

Offline JonesyUK

  • Members
  • Posts: 653
Re: Route Profits: Turboprops vs. Jets
« Reply #8 on: June 20, 2009, 04:34:31 PM »
I'd recommend the 1-11, mine earn anything between $100,000-$400,000 p/w. (have plenty available for lease too  ;))

 

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